Longtime Houston attorney Tom Kirkendall's observations on developments in law, business, medicine, culture, sports, and other matters of general interest to the Houston business, professional, and academic communities.

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Expensive Toy Trains

Cory Crow posted a good overview this past Friday on how Houston’s Metropolitan Transit Authority has failed to develop and operate a transit system that meets the special needs of the Houston metropolitan area (Metro’s debacles have been frequent topics on this blog, most recently the here and here).

Cory’s post coincided with this Richard White/NY Times op-ed in which he previews one of the themes of his new book on the financing and construction of the the 19th-century transcontinental railroads – that governmental guaranty of the bonds used to finance the construction meant that “if there be profit, the [private] corporations may take it; if there be loss, the government must bear it.” As White notes, that dynamic is again at play with regard to the Obama Administration’s high-speed rail proposals:

Proponents of the transcontinental railroads promised all kinds of benefits they did not deliver. They claimed that the railroads were needed to save the Union, but the Union was already saved before the first line was completed. The best Western farmlands would have been settled without the railroads; their impact on other lands was often environmentally disastrous. For three decades California commodities could move more cheaply, and virtually as quickly, by sea. The subsidies the railroads received enriched contractors and financiers, but nearly all the railroads went into receivership, some multiple times; the government rescued others.

As more astute members of Congress came to recognize, the subsidies were a mistake. . . .

After 1872, the country turned against the subsidizing of large corporations. It was a little late. Fraud and failure left a legacy that would lead to four decades of government attempts to get back what had so carelessly been given away. In the 1890s, Congress was still trying to recover money from the Pacific Railway.

Yet here we are again. The Obama administration proposed a substantial subsidy, $53 billion over six years, to induce investors to take on risk that they are otherwise unwilling to assume. Such subsidies create what the economist Robert Fogel has called “hothouse capitalism”: government assumes much of the risk, while private contractors and financiers take the profit.

The reality is that virtually all light rail systems and most high-speed rail systems are unsustainable without massive federal subsidies, which are hit and miss, at best. Besides, the financial benefit of these rail systems are highly concentrated in only a few interest groups. Unfortunately, those groups do not include one that is comprised of a substantial number of users.

A strategy of "build as much light rail as possible now and then figure out how to pay for it later" is not a coherent transit plan for the Houston metropolitan area.

What is it going to take for Houston’s local governmental leaders to understand that?

2 thoughts on “Expensive Toy Trains”

Some very good points above.
Either the city should build, own, and operate
Houston’s transit system (and do so without unjustly
enriching “speculators” like Bob Lanier), or else
let the vaunted free enterprise system have at it, but without any taxpayer-funded welfare (let the entrepreneurs prove they can do something without
the government bearing the cost). If they fail, then the City should have the right to purchase the system and run it. After all, all those
low-age domestics etc. are needed in River Oaks,
Tnglewood, Memorial etc., and unless the city is willing to pay for cab fare to get them to their
places of work, even rich people are likely to
“bend” enough to realize it’s unrealistic to expect people who depend on public transit to all start walking to work.